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Deal replaces proposed OneStim JV

Weatherford (ticker: WFT) announced the sale of its U.S. pressure pumping business today, completing a major portion of the company’s refocusing project.

Schlumberger (ticker: SLB) will pay Weatherford $430 million in cash for Weatherford’s U.S. pressure pumping and pump-down perforating related facilities and contracts. Weatherford will retain its multistage completions portfolio, manufacturing capability and supply chain, meaning it will continue to operate in the U.S.

This sale is somewhat unexpected, as Weatherford and Schlumberger had previously announced a joint venture, called OneStim, which would combine the companies’ completions services. The JV would have been owned 70/30, with Schlumberger holding the larger share. Weatherford was expected to receive a one-time $535 million cash payment from SLB as part of the deal, primarily for the company’s multistage completions business.

According to RBC, the deal doubles Schlumberger’s hydraulic fracturing fleet and avoids a potential future payment to acquire Weatherford’s share of OneStim. Weatherford will receive most of the cash from OneStim without giving up its multistage completions business, but will not receive the future income from the JV.

Weatherford looks to save $300 million annually, sell rigs business

The deal is part of Weatherford’s larger “Project 300,” a focused program to achieve $300 million in annualized cost savings. The company suspended its pressure pumping business in the middle of Q4 2016 as a cost-cutting measure, and announced its intention to cut the business entirely in February.

In addition to the sale of its pressure pumping line, Weatherford expects to divest its land rigs business. Monetization of this business is expected to occur in the second half of 2018. When Weatherford first announced the sale of these lines, it anticipated proceeds of $1.5 billion to $2 billion. The companycurrently has about $7.9 billion in debt, which it intends to pay down. All the proceeds from the sale of its pressure pumping business will be used to reduce debt.

“The closing of this transaction represents another step on our path toward building a solid and strong company and unlocking the potential that exists within Weatherford,” stated Mark A. McCollum, President and Chief Executive Officer of Weatherford. “Although not as originally anticipated, this transaction delivers cash proceeds that enable our Company to begin the deleveraging process and, coupled with our transformation plans, will lead to a leaner organization with lower debt and significantly higher profit margins. In addition, retaining 100 percent of our leading land-based multistage Completions business allows for significant upside potential for Weatherford.”

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